The Cost of Overtime: When Does Hiring Make More Sense?

Overtime is a sensible way to cover a short-term peak. When it becomes a regular part of every week, it is worth adding up. Regular overtime is often paid at a premium, it tires people out, and the same hours could sometimes be worked more cheaply by an extra person.

What the law says

According to GOV.UK, employers do not have to pay extra for overtime, but a worker's average pay for all the hours they work must not fall below the National Minimum Wage. Overtime rates, such as time and a half, are set by the employment contract. From April 2026 the National Living Wage for workers aged 21 and over is £12.71 an hour.

Worked example

A small manufacturer has three operatives each working 8 hours of overtime a week, for 46 weeks a year. Their basic rate is £14 an hour and overtime is paid at time and a half. Employer NI is 15% on these earnings.

• Overtime hours: 3 × 8 × 46 = 1,104 hours a year.
• Cost: 1,104 × £14 × 1.5 × 1.15 = £26,662.
• Premium: 1,104 × £14 × 0.5 × 1.15 = £8,887.
• Full-time equivalent: 1,104 ÷ (37.5 × 46) = 0.64 of a person.

The premium alone is £8,887 a year. A part-time employee working the same hours would cost the basic rate plus their own on-costs, and the existing team would go home on time.

Calculate your overtime cost

Before you hire

Overtime is not always a sign that you need another person. Check why it is happening:

• Genuine demand peaks are what overtime is for.
• Delays and waiting during the day, such as waiting for materials, decisions or a machine, push work into the evening. Fixing the delay is cheaper than paying for it.
• Rework means paying twice, once at overtime rates.
• Absence cover. If overtime follows absence, see the Bradford factor guide for how to manage absence fairly.
• A bottleneck. If overtime is always at the same step, it is probably the constraint. The theory of constraints guide shows how to get more from it first.

If the overtime that is left after fixing these is steady and close to a full-time person's hours, cost a hire using the true cost of an employee calculator.